IFIs push central Asia PPP

Central Asia may be close to entering the public-private partnership era for infrastructure investment – a development that could help transform these landlocked, inaccessible nations

Central Asia may be close to entering the PPP era for infrastructure investment  a development that could help transform these landlocked, inaccessible nations.

Juan Miranda, ADB Director General for Central and West Asia, said this weekend that we havent had in Central Asia the unique transaction that says: the future looks like this,  but he believes one is not far away.

PPP arrangements could be applied to a multi-billion dollar project to convert gas into chemicals in northern Uzbekistan, Miranda said.If that happens, weve created a message. We convey an opportunity to the international investment community that this place is open for business.

Central Asia urgently needs private sector investment, but is not set up to attract it. It is mountainous, making road and pipeline development difficult; population centres are thousands of miles from ports; and the world investment community has been indifferent towards them.

Getting deals completed is limited partly by a lack of private sector risk appetite and partly the absence of an environment that would attract it. In Central Asia we have the big ticket projects waiting for the private sector to invest, but unlike other parts of Asia the upstream work [such as legal infrastructure] lags behind, Miranda said.

Concession laws do exist, notably in Kazakhstan  which has a dedicated PPP unit within its government and an approved list of projects for it to pursue  but usage has so far been modest. There is a comfort zone that is not that huge here, and we need to expand that comfort zone.

In the meantime Miranda expects gradual progress, with most involvement at the less committed end of the spectrum of private sector involvement.

Would you be able to have an all-singing, all-dancing concession and BOT? Maybe not right now, he acknowledged. But maybe you go in more realistically, and expect a management contract to start with. That, he feels, is still progress. If you go from zero to something thats no longer zero, that still represents success.

A positive sign for the region came last week with the signing of Russias first major PPP deal, a ?715 million loan financing package for the expansion of Pulkovo Airport in St Petersburg. We think its a really path-breaking deal, Rashad Kaldany, Vice President of the IFC (the World Banks private sector arm), said.

Russia has a long history of PPPs faltering, mainly because investors consider them too risky. Kaldany said that the difference here was the government having a dedicated team that was empowered to negotiate and engage, being willing to adjust if need be, and to listen to investors.

Kaldany believes that the deal demonstrates not just for Russia but for all CIS countries that this can be done, and expects PPPs to follow in Central Asia. The IFC is looking at PPPs for a hospital and part of a road in Kazakhstan, and health diagnostic centres in Uzbekistan, among other things. There is progress and we are encouraged.

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